Category of Goods & Services Exempted from GST

Overview : GST Exemption in India means that certain goods and services don't attract GST as no GST tax is levied on them. The motive behind GST exemption is to make essential or daily-need goods and services easily accessible and affordable to a larger population. The post helps you understand about the list of Goods and Services that are exempted from GST.

GST Exemption refers to exempting some essential Goods and Services from this tax. In simple words, many daily-needs goods and services are kept free from GST tax so that most of the population can afford them easily. The GST-exempted Goods and services include many daily essentials, mainly Food Products, Healthcare, and Educational Services. In this blog, we will discuss the list of exempted Goods and services under GST.

Key Takeaways

• GST exemptions alleviate tax burdens, especially on essential goods, making them more affordable and supporting public welfare.
• The Key Goods exempted from GST include essential Food Items such as Fresh produce, Dairy products, and certain healthcare supplies. This allows a larger population to have access to essentials, which aim to stabilise prices and promote health and food security.
• The dual authority of the Central and State Governments in granting GST exemptions allows it to meet local and national needs, benefiting both consumers and businesses.

What is the GST Exemption?

GST exemptions refer to the products and services that are not subject to GST liability. GST exemptions are also done to alleviate the tax burden on the goods and services commonly used by the population. It's a great move by the government to make goods of the essential category more affordable and thus easily accessible to the general public.

These exemptions are not arbitrary as they are driven by socio-economic factors and policy goals that help support social public welfare. For example, daily essential items like salt and fresh fruits are fully exempted from GST to ensure that they can be easily accessed by the common people and even those falling in the lower income category.

Types of GST Exemptions

GST Exemptions can be classified into three main types: absolute, conditional, and partial.

• Absolute Exemptions : These exemptions are applied to goods and services without any specific condition as they are unconditional in nature and, therefore, applied universally.
• Conditional Exemptions : As the name implies, these exemptions are subject to meet specific conditions or criteria and therefore, they are applied in certain conditions.
• Partial Exemptions : exemptions partially reduce the GST on goods and services but do not eliminate GST entirely as these exemptions have certain limitations.

Who can grant GST Exemptions?

Now, most of you would be considering who grants GST exemptions? So, let us tell you that both Governments; Central and State, possess authority to grant GST exemptions. This dual authority characteristic is so beneficial as it ensures the exemptions can cater to the local and national policy goals. The GST Council is the authorised body to make recommendations on GST policies, regularly updating the exemptions list to reflect changing economic and social needs.

Categories of Goods Exempted from GST

A number of day-to-day life use items are exempt from GST; from fresh produce to basic food items to medical equipment, etc. This is to ensure the basic necessities of life are affordable for everyone and can't be compromised. These exemptions make a big difference to the household budgets especially for low-income families. By exempting these items from GST, the government's sole aim is to stabilise prices and make essential goods more accessible to the general public.

Let's go through the exempted categories of Goods and Services to understand why they are exempted from GST!

• Fresh Produce

All unprocessed fruits and vegetables, including fresh fruits and leafy vegetables are GST exempt. This includes fresh vegetables, roots and tubers, excluding those that are frozen or preserved. Keeping these natural food items tax free promotes healthy eating and reduces household expenses.

Unprocessed cereals and grains are GST exempt. This includes wheat, rice and barley. This is important to keep staple foods affordable. Many seeds for crops like paddy and wheat attract 5% GST while vegetable seeds are completely exempt. This tax exemption makes fresh fruits, vegetables and such other essential stuff easily affordable and also supports the overall agriculture sector by alleviating costs for farmers.

• Dairy Products

Dairy products like milk, curd and cheese are also GST exempt. These are basic food items that are essential for a balanced diet. These basic food items help a person meet their daily nutrition requirements by providing them essential nutrients. Exemption of such dairy products from tax helps people access nutritious products easily. So, it can be seen as a strategic move of the government to support public health and well-being.

• Essential Food Items

Basic staples like rice, bread and salt are categorised as essential food items and are GST exempt. This is to keep these daily necessities within everyone’s reach especially for low income households. By exempting agricultural goods from GST, the government helps keep prices of these essential commodities stable. This exemption plays an important role in making food prices stable and also to support the livelihood of the farmers. All agriculture-related services except horse breeding are exempted from GST.

The Agricultural Services exempted from GST include supply of seeds and fertilisers, leasing of agricultural machinery, etc. Exemption of such services reduces the financial burden of the farmers and also makes necessary agricultural inputs more accessible and affordable.

• Seeds and Fertilisers

Some fertilisers especially organic manure that are offered in branded containers or packaging are GST exempt. They also include fertilisers that don't come in branded containers. Tax exemption on these essential agricultural inputs will significantly reduce production costs for farmers and thus promote sustainability and agricultural productivity. Exemption of these inputs play a big role in reducing financial burden on farmers and make essential agricultural inputs more accessible.

• Agricultural Machinery Leasing

Leasing of agricultural machinery is GST exempt which reduces operational costs for the farmers. This is a big exemption as it allows farmers to acquire necessary equipment without the added financial strain of taxes. These leasing agreements are to support farmers by reducing their operational costs. Leasing agricultural machinery makes agricultural machinery more accessible and helps farmers to boost their agricultural productivity and efficiency.

• Healthcare and Medical Supplies

Healthcare is another crucial area where GST exemptions play a significant role. Essential services like healthcare and education are typically services exempt from GST to make it more accessible. Some medical supplies and healthcare goods are GST exempt to make them more affordable for the public. This includes a wide range of medical and healthcare products that promote public health. These exemptions are to ensure that the essential healthcare services and supplies are within reach for everyone, especially those in need.

• Medicines and Pharmaceuticals

Essential medicines, including those for chronic conditions, are typically exempted from GST. This includes various formulations and diagnostic kits, so patients have access to the medicines they need. These essential drugs and medical formulations are registered under specific schedules and are GST-exempt to facilitate better access to healthcare. This makes it easier for patients to afford their medicines and promotes better health outcomes.

• Medical Equipment

Some medical devices like hearing aids and orthopedic appliances are GST exempt to ease access for patients. These exemptions support patient care by making essential medical devices more affordable. Classifying these medical devices as GST exempted goods ensures that those with disabilities or medical conditions can access essential equipment without the added financial burden.

• Cultural and Religious Goods

Cultural and religious goods also benefit from GST exemptions as they are important in our society. Goods and services used for cultural, religious or charitable purposes may be GST exempt. This includes certain cultural and religious artifacts that are GST exempted goods to honor and preserve heritage.

Artworks that represent cultural heritage are GST-exempt to support artists and cultural expression. Rentals for premises used for religious gatherings and items used for religious ceremonies, such as idols, are also exempted from GST. These exemptions preserve cultural practices and support charitable activities.

• Environmental Goods

Promoting sustainability is another area where GST exemptions make a big difference. Municipal solid waste treatment services are exempted from GST to encourage better waste management practices in urban areas. Certain eco-friendly construction materials made from agricultural waste are also GST-exempt to promote sustainable building practices.

The adoption of green products has increased due to lower GST rates and growing environmental awareness among consumers. Waste management services which are crucial for ecological balance have 5% GST and support local service providers. These exemptions promote sustainability and responsible consumption.

• Miscellaneous Exempt Goods

Some miscellaneous GST exempted goods include various categories, each serves a different purpose. Whether it’s to support technological advancement or to make essential commodities easily accessible, this tax exemption plays a big role in our rapidly growing economy.

Services Exempted from GST

Services exempt from GST include various essential and supportive services that enhance public welfare. Key exemptions include healthcare services, which are free to make them accessible to all and reduce the overall cost burden to patients. Educational services are also exempt to make learning more accessible and support a knowledge-based economy. Certain government services and services provided by the charitable organisations are GST exempt to recognise their role in societal and community support.

Exemption extends to specific financial services, such as those related to the issuance of loans and transfer of securities, which is critical for financial stability. Public utility services, including water supply and sanitation, are also exempted to make these basic necessities affordable.

Cultural and religious services that reflect and preserve the cultural and social values of the community are GST-exempt to support cultural heritage and religious practices. These exemptions not only reduce GST liability for the service providers but also support local service providers by lowering compliance burdens.

Exempt, Nil Rated, Zero Rated and Non-GST Supplies

Understanding the difference between Exempt, Nil rated, Zero rated and non-GST supplies is important in GST. Exempt supplies are basic essential items that do not attract any GST and input tax credit cannot be claimed. Nil rated supplies have 0% GST but no input tax credit can be claimed. Zero rated supplies include exports and sales to Special Economic Zones with 0% GST and input tax credit. Non-GST supplies are items that are outside GST but may be subject to other taxes. Each of these has a unique purpose under GST and different tax implications.

How GST Exemptions are Granted?

GST exemptions are granted through notifications issued by the Central and State Governments based on recommendations from the GST Council. Both Central and State governments are responsible for granting GST exemptions so that it can be tailored to local and national needs. The effective date of exemption notification is mentioned in the notification itself.

Why GST Exemption on Goods/Services?

If we look at the reasons behind the exemption of certain goods/services, they are numerous. Some of the key reasons behind GST exemption are;

Affordable : Main reason behind GST exemption is to keep certain goods and services affordable to all, mainly to lower income group people.

East Access : It ensures accessibility of highly essential life necessities within reach of larger population without putting any extra financial or tax burden on their pockets.

Economic Stability : Exemptions of some specific goods & services can help stabilise essential sectors that play a vital role in economic as well as overall public well-being of a nation.

Latest Updates in GST Exemption Policies

The last update in GST exemption policies had taken place on June 22, 2024. The updates in GST are important to keep the tax system aligned with current economic and social needs. From November 01, 2024, taxpayers have got a new provision that helps them rectify unpaid or underpaid GST without paying any penalty. While GST has also lowered tax on many green technologies, some advanced renewable energy solutions still have higher tax rates that may hinder technologies advancement.

Conclusion

GST exemptions are important in India's rapidly growing economy to make basic necessities easily accessible for everyone. By understanding how these exemptions work, one can have a better GST knowledge that helps make most out of it; whether you are a consumer looking to save or a business looking to optimise. Stay updated on recent changes in GST and use these exemptions to avail big savings.

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Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.